Banks need to keep a close eye on fintech or risk doom

New report advises cooperation between public authorities and tech firms to stay fully informed about the latest tech developments.

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The Bank of International Settlements has recently warned international central banks all over the world to keep financial technology, like blockchain or big data, on their radar.

Regulatory reform officials at the Basel Committee on Banking Supervision (dubbed ‘central bank of central banks’) said the emerging fintech could have serious implications on how banks do business.

Its latest report advises banks that they should cooperate with public authorities, as well as each other, to stay fully informed about the latest tech developments, as that would minimise potential business threats.

“Banks will find it increasingly difficult to maintain their current operating models, given technological change and customer expectations,” the report stated. “The current position of incumbent banks will be challenged in almost every scenario.”

The report says that there are varied opinions on fintech. While McKinsey & Co estimated back in 2015 that up to 40 per cent of revenues and up to 60 per cent of retail banking profits could be put at risk by fintech in the next decade, others saw the changes as positive.

BIS believes that adopting new technologies could result in banks offering better services. However, they need to keep a close eye on new players, which might prove to be just ‘too agile’.

Technology like the blockchain could see banks lose their significance, because there would no longer be the need for a trusted third party.